The UK’s travel and tourism industry is expected to be one of the first sectors of the economy to benefit from the Brexit fallout, as the weak pound makes Britain an even more desirable and cost effective holiday destination for both domestic and international holidaymakers, says Begbies Traynor, the UK’s leading independent insolvency firm.
Utilising Red Flag Alert data, Begbies Traynor's Q2 2016 research, which monitors the financial health of UK companies has found that the British tourism industry was already in a state of improving financial health in the three months leading up to the Brexit vote, with levels of financial distress falling across UK-focused travel and leisure businesses.
The research shows that during the past quarter, ‘Significant’ financial distress among UK Hotels and Accommodation fell 4% (down to 3,382 struggling companies), decreased by 3% among companies focused on Leisure & Cultural activities (5,464 companies) and fell by a further 4% within the wider British Travel and Tourism sector (3,791 companies).
While much of the UK economy is expected to be negatively impacted by the Brexit vote due to increased uncertainty and rising concerns over job security, Begbies Traynor predicts that the British tourism industry will be one of only a handful of sectors to immediately benefit from the Referendum decision. According to recent reports, the ongoing sterling weakness against the Euro is expected to add an extra £245 to the cost of a European getaway for the average British family, making holidays in the UK even more appealing.
However Begbies Traynor expects the same exchange rate fluctuations could have the opposite effect on UK travel agents focused on booking holidays abroad, which may struggle to make ends meet as British holidaymakers cut back on increasingly costly international travel post-Brexit. During Q2 2016 there were 921 UK travel agencies suffering from ‘Significant financial distress, up 2% compared to the same stage last year.
Julie Palmer, Partner at Begbies Traynor, says:
“Despite the typically unpredictable British weather over the past three months, our data shows that levels of ‘Significant’ financial distress actually decreased across all key sectors of the UK tourism industry in the lead up to the Brexit vote, suggesting the sector is in rude health ahead of its vital summer season.
“Since then, while most sectors of the economy have started to batten down the hatches to wait for the Brexit storm to blow over, in contrast the UK’s domestic travel and tourism industry is expected to be one of the first sectors of the economy to see tangible financial benefits from the Referendum result.
“The significantly weaker pound has already made international travel for British families so much more expensive, which should encourage more to favour staycations on home soil. Meanwhile currency fluctuations have also made travel to the UK from Europe and the US in particular more affordable, helping incoming tourists to get a lot more bang for their buck.”